Let’s be clear about what the federal Centers for Medicare and Medicaid Services (CMS) told the Arkansas Department of Human Services last week: The state was not in compliance with federal law. The state violated federal regulations in imposing a 10-day deadline for Medicaid beneficiaries to respond to confusing letters the state sent as part of its troubled income-verficiation-and-renewal process. Medicaid rules require an annual renewal process and clearly demand that beneficiaries get 30 days to respond. This is the issue that the Arkansas Blog and others have been noting for weeks while the Asa Hutchinson administration has insisted that the state was perfectly in compliance with the law. CMS has now settled the dispute.

The feds were polite about it and sent a formal letter at the state’s request; the letter stated that the feds had previously had communications with the state that may have led DHS officials to believe their alternative interpretation of the federal guidelines was kosher (just how this breakdown came about remains hard to parse as CMS has not been willing to comment on the record about the mess).

The relevant federal regulations for states doing annual income Medicaid eligibility verification clearly state that beneficiaries must be given “[a]t least 30 days from the date of the renewal form to respond and provide any necessary information.” So what led to the confusion? The argument from the Hutchinson administration was that the 30-day rule was for renewals, whereas the state was doing a check for change in income, which has different rules for response time. If the state receives information that someone’s income has changed (or in this care, initiates its own investigation and identifies changes in income), it can legally demand income verification documents within 10 days (the minimum allowed). The state is not required to troll the rolls on an ongoing basis for income changes and make beneficiaries jump through additional hoops if there’s a significant change, but it’s allowed to — and it’s allowed to impose a 10-day response deadline for that income-verification process.

The problem for the state: the state was using this income-change check as its renewal process. DHS Director John Seligtold me as much directly when I discussed this issue with him several weeks back. The state did not yet have the technology in place to implement the pre-populated form required for the renewal process (Arkansas was months, and for some beneficiaries more than a year, late in initiating that renewal process). So instead, it used the income-check system as a “temporary mitigation strategy.” But again, this was the state’s renewal process. By using the 10-day rule that applied to a different process altogether, the state was essentially doing an end-around on the federal requirements (no wonder that no other state tried this stunt on renewals). The fact that it was using a “temporary mitigation strategy” doesn’t change the fact that the state still needs to do a proper renewal process, including giving beneficiaries 30 days to respond.

Multiple sources had told the Times for weeks that CMS was looking at a “compliance issue,” but DHS officials had maintained that they were in frequent communication with the feds and that all was well. DHS spokesperson Amy Webb said that their first indication that the feds had a problem was a conference call on the afternoon of Friday, August 21. State officials were then mum about the problem for a full week until they received the official letter last Friday morning. Did any state officials have even a hint this was coming before that (other than pests like me asking all the time)? Presumably not, though it’s unknowable. In any case, for whatever reason, Hutchinson was comfortable giving a presser aggressively defending the 10-day policy on Tuesday, August 18.

The rebuke from the feds came just days after Hutchinson’s presser, in which he continued to erroneously state that 10 days was the minimum allowed by the federal government. Hutchinson refused to budge on the 10-day policy, arguing that it should be kept in place because it was the “status quo” and “invigorated the process.” In fact, wholly aside from the legal problems, the policy had proven to be unworkable and unreasonable. The state had no outreach plan in place to communicate with tens of thousands of hard-to-reach beneficiaries, many with health insurance for the first time, about a confusing new renewal process they knew nothing about. The letters sent by the state were vague, confusing, and easily mistaken for junk mail. DHS was unprepared for the volume and faces an ongoing bureaucratic nightmare, including a backlog of beneficiaries who have sent the requested information. The short 10-day window gave insufficient time to work out the kinks, follow up with beneficiaries, or engage other stakeholders in the outreach effort. The result was a disaster: more than 50,000 have lost coverage (or will on September 1). DHS officials admit that many of them are in fact eligible; at least some had coverage cancelled despite turning in their paperwork on time.

The state’s 10-day policy was such a clear violation of the federal regs around renewals that it’s hard to imagine the feds letting it continue regardless, but it’s at least worth wondering whether the feds were partly stirred to action by how disastrous the rollout of the state’s renewal process has been. The feds’ flexibility tends to dry up if tens of thousands of eligible beneficiaries are getting kicked off of coverage, with no evidence that the state is prepared to reinstate them promptly as their information comes in.

I’ll have a little more on this in a subsequent post but remember that the state has no plan in place to reinstate or even communicate with more than 50,000 beneficiaries who lost coverage because of a policy that it is now clear directly violated federal regulations. Many or most of them are in fact eligible for the program according to the state’s own data and are now facing gaps in access to care with potentially dire consequences. It may take a lawsuit to get relief for them; there is recent precedent for courts forcing states to reinstate beneficiaries who were kicked off of their coverage via policies not in compliance with Medicaid regulations.